Piper Jaffray says iPhone 3G's real cost to users: $407

With a public increasingly puzzled about the actual cost of an iPhone 3G, researchers now see Apple losing some of its early sales to buyers waiting for a less costly upgrade.

The financial firm's senior analyst Gene Munster explains that the multi-tiered iPhone 3G prices, which vary depending on the customer's existing status with AT&T, masks the real cost of entry for many users.

The typical price for an 8GB iPhone is more likely to be a considerably higher $407 based on what most will actually pay, according to the report. That cost is just above the $399 price for non-upgradable AT&T customers and is more than double the $199 price touted by Apple and AT&T in their marketing campaigns — a sticker price which is strictly a "best case scenario" not likely to be seen by many, Munster says.

The often-criticized monthly plan is also said to be a shield for the true cost of owning a phone and may well scare off some customers. Equaling the original iPhone's plans, including the 200 text messages, costs $75 per month, or $15 more per month than what subscribers have to pay for the earlier handset. Even with ideal pricing, an owner of an iPhone 3G ultimately pays $360 more than they would have before over the life of the phone's two-year contract.

A combination of the two pricing woes is predicted to leave many customers left in an unenviable position at launch. The impact of this is could be serious enough to force many customers to wait up to roughly 18 months before making the purchase, no matter how interested they are in Apple's second-generation hardware.

"Buyers will wait until their contract on their current carrier expires, or AT&T subscribers become upgrade eligible," the analyst claims. "As a result, we believe initial iPhone 3G sales will be diluted, but that sales will increase over the next 18 months as the average cost decreases."

Researchers at Piper Jaffray are nonetheless convinced Apple will have little difficulty blossoming its marketshare in the US within as little as a year. Munster cites both a survey of 200 cellphone owners and the potential $1 billion market of the just-launched App Store as factors in growing Apple's command of the US phone market from an estimated 3.4 percent today to approximately 8 percent in mid-2009.

As many as 45 million iPhones are still predicted to ship within all of 2009, he adds.

The actual average price for an 8GB iPhone should be as high as $407, according to the report. That cost is just above the $399 price for non-upgradable AT&T customers and is more than double the $199 price touted by Apple and AT&T in their marketing campaigns -- a sticker price which is strictly a "best case scenario" not likely to be seen by many, Munster says.

What?? This makes no sense... a combined pool of $399 and $199 purchases leads to an average price of $407? On what crack addled planet is this??

And yes, not many people will see that $199 price... like, say every person who *isn't* an AT&T subscriber. Wow, there's gotta be like, what four of them out there, right? No? *Millions* you say? Well golly gee, I guess Gene's talking out of his ass again.

Care to edit this entry to make it clear what's going on, or link to the actual source article you got it from? Because right now, this is pretty poorly explained.

it was well about time,that someone says the truth.
The phone is actually well over 600$( = gets right about twice as expensive) and in fact, it's not just the $ that scares people- it's also the tight "regime" of signing a contract with the carrier . How come , that we can not pay cash !??! WTf !? \

I think there will be a thriving iPhone 2.5G market once the 3G drops. Ebay will see lots of action for those old phones. I wonder though, will purchasers of the first generation iPhone pay the same price as current owners, or will AT&T try to force the new plan on them even though they do not have 3G phones? I may just sit this one out and wait a few months to upgrade. I want to see how the new 2.0 Apps work with my original iPhone before making a decision.

I am keeping my current 1st Gen iphone. It works well, and my contract is has only a year left. I may buy a new iphone but it will be on the black market when my contract is up. I urge everyone to stay away from att&t until they stop screwing us my making us sign a new contract.

As a current AT&T client-I must say I won't be getting the 3G iPhone. I was very interested in upgrading my current phone; but the new pricing plan and the added charge to send/receive text was a deal breaker for me. I have a current AT&T family plan that includes texting (200 per month).

Too bad AT&T is the sole provider-in this case competition amongst the mobile telephone providers would be a good thing.

I'll just admire the 3G iPhone from afar (I guess my SonyEricsson W600i will have to do for yet a longer time).

I purchased it originally for $399 and would have upgraded for $199 but the pricing has been fairly mysterious. It does appear that I am going to get jammed on the upgrade so I will wait (unhappily).

What do you find mysterious about it? If you have an original iPhone under contract with AT&T then you are eligible for the $199 price. Your AT&T account or friendly CSR rep will inform you are eligible or not.

I am keeping my current 1st Gen iphone. It works well, and my contract is has only a year left. I may buy a new iphone but it will be on the black market when my contract is up. I urge everyone to stay away from att&t until they stop screwing us my making us sign a new contract.

You'd rather spend $600 or more for a 3G iPhone that you can still only use on AT&T? How exactly does that make sense?

This article desperately needs re-editing. It makes no sense as currently formatted. Gene can be illogical at times, but not as crazy as this presentation in AI makes it seem. And "blossoming" is not a verb as it's (mis)used here.